Investment Commentary – November 16, 2022
Year to Date Market Indices as of November 16, 2022
• Dow 33,595 (7.56%)
• S&P 3,976 (-16.25%)
• NASDAQ 11,258 (-28.89%)
• OIL $85.12 (12.84%)
• Barclay Bond Aggregate (-14.62%)
Consumer prices rose 0.4% in October, less than expected, as inflation eases
The consumer price index increased 0.4% for the month and 7.7% from a year ago, both lower than estimates.
Excluding volatile food and energy costs, so-called core CPI increased 0.3% for the month and 6.3% on an annual basis, also lower than expectations.
Prices declined for medical care services, used vehicles and apparel. Shelter costs posted their highest monthly gain since 1990.
Markets soared on the report and Treasury yields tumbled.
Markets reacted sharply to the report, with the Dow Jones Industrial Average up by more than 1,000 points. Treasure yields fell sharply, with the policy-sensitive 2-year note tumbling 0.3 percentage points to 4.33%.
The consumer price index rose less than expected in October, an indication that while inflation is still a threat to the U.S. economy, pressures could be starting to cool.
The index, a broad-based measure of goods and services costs, increased 0.4% for the month and 7.7% from a year ago, according to a Bureau of Labor Statistics release Thursday. Respective estimates from Dow Jones were for rises of 0.6% and 7.9%.
“One month of data does not a victory make, and I think it’s really important to be thoughtful that this is just one piece of positive information, but we’re looking at a whole set of information,” San Francisco Fed President Mary Daly said in response to the CPI data.
Excluding volatile food and energy costs, so-called core CPI increased 0.3% for the month and 6.3% on an annual basis, compared with respective estimates of 0.5% and 6.5%.
Thursday’s surge: Thursday’s release of better-than-expected inflation data ignited a one-day stock market rally, sending the major U.S. indexes to their biggest daily gains since the spring of 2020. The NASDAQ surged 7.4%, the S&P 500 rose 5.5%, and the Dow added 3.7%.
Bond price rebound: The new inflation numbers fueled speculation that the U.S. Federal Reserve could begin to scale back the size of interest-rate increases starting in December, sending bond prices higher and yields lower. The yield of the 10-year U.S. Treasury bond tumbled from 4.16% at the end of the previous week to 3.82% on Thursday. (On Friday, U.S. bond markets were closed for the Veterans Day holiday.)
Change of direction: The major U.S. stock indexes rebounded in a big way from the previous week’s declines, driven largely by a one-day rally on Thursday that was the largest in two and a half years. The NASDAQ posted the top result with a weekly gain of more than 8%; the S&P 500 added about 6% and the Dow rose around 4%.
The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.
https://www.marketwatch.com/ (Market Indices)
https://www.jhinvestments.com/weekly-market-recap (Around the Web & Upcoming Events)
https://finviz.com/groups.ashx (YTD Performance Chart)